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SMM Evening Comments (Jul 29): Most Shanghai Nonferrous Metals Closed with Gaining on Fed’s Interest Rate Decision
Jul 29,2021 19:00CST
Source:SMM
Shanghai nonferrous metals market closed the day with broad gaining on the Fed’s decision to keep interest rate unchanged.

SHANGHAI, Jul 29 (SMM) – Shanghai nonferrous metals market closed the day with broad gaining on the Fed’s decision to keep interest rate unchanged.

Shanghai copper edged down 0.68%, aluminium up 0.64%, lead decreased 0.16%, zinc went up 0.22%, tin climbed 1.04%, nickel added 0.63%.

Copper: The most-traded SHFE 09 copper closed down 0.68% or 490 yuan/mt to 71610 yuan/mt, with open interest down 1801 lots to 136600 lots.

On the macro front, the US interest rate was unchanged in consideration of potential risks for economic outlook according to Fed’s meeting, which corresponded with market expectation. While the market had bet before the meeting, thus earnings may have paid off. The Fed’s meeting will have limited influence on copper prices.

Tonight’s focus will be the US GDP data for 2Q, which is expected to remain at high levels. However, as delta mutant weighs on economic outlook, the pandemic and China-US relationship may blur copper prices trending.

Aluminium: The most-traded SHFE 2109 aluminium closed up 0.64% or 125 yuan/mt to 19680 yuan/mt, with open interest down 1958 lots to 260037 lots. According to SMM, aluminium ingot social inventories shrank greatly to 758,000 mt, with spot transactions in east China stood mostly at 19500-19530 yuan/mt. From the macro front, Fed failed to release its timeline on reduced debt purchasing, offering strong support to LME aluminium against the weakened USD index. From the fundamentals, power restrictions on electrolytic aluminium companies in Yunnan, Guangxi and Guizhou tightened, triggering concerns over production expansion in south-west China in the future. Attention shall be paid to the influence of fundamentals and macro front on short.

Zinc: SHFE zinc closed up 0.22% or 50 yuan/mt to 22360 yuan/mt, with open interest down 1929 lots to 99014 lots.

From the macro front, the Fed’s rhetoric was still dovish, but was “more hawkish” than expected. Opinions came that Delta mutant will not greatly affect US economy, and the government was trying to stabilise market sentiment. From the fundamentals, government reserves release open bidding started today, leading to wild fluctuation in zinc prices. The arrival of released reserves will take about two weeks, thus attention shall be paid to social restocking and influence on zinc prices.

Lead: The most-traded SHFE 2109 lead closed down 0.16% or 25 yuan/mt to 15970 yuan/mt, with open interest up 427 lots to 76550 lots. The spot market was more willing to deliver primary lead; while fine secondary lead smelters were still reluctant to sell, further narrowing discounts on deliveries. The Fed’s meeting will continue to ease high inflation, with no clear signal on QE or interest rate increase from the US or Europe. Tonight’s focus will be the Shanghai lead’s maintaining uptrend and breaking 16000 yuan/mt.

Tin: The most-traded SHFE 2109 tin closed up 1.04% at 233160 yuan/mt, with open interest up 1170 lots. Across the market, major capital, instead of the wait-and-see attitude in the previous two trading days, actively entered the market to build positions. 230000 yuan/mt is still the major support, testing major capital’s sustainability.

Nickel: The most-traded SHFE 2109 nickel closed up 0.63% or 920 yuan/mt at 147500 yuan/mt over yesterday, with open interest up 5162 lots to 161623 lots.

USD index edged down on Fed’s dovish stance, pushing up commodity market. Changes to export tariff policies did not significantly affect stainless steel, combined with the expectation on production restriction to support stainless steel and raw material prices, nickel prices may follow. Supply shortage remained. Tonight’s focus will be the number of first claims on unemployment benefits in the US in the week ended July 24.
 

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